Talisman Energy says approached by Spain's Repsol about deal

Wed Jul 23, 2014 6:05pm EDT
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By Scott Haggett and Julie Gordon

CALGARY/VANCOUVER (Reuters) - Talisman Energy Inc TLM.TO shares rose 13 percent on Wednesday as it confirmed it has been approached by Spain's Repsol SA (REP.MC: Quote) about potential deals, raising the prospect that one of Canada's largest independent oil companies will sell off major assets or be taken over.

Talisman, which has a market capitalization of nearly C$11 billion ($10.2 billion), did not provide details saying only it had been contacted by the Spanish firm "with regards to various transactions."

The company, which operates in North America, southeast Asia, the North Sea, Colombia and elsewhere, has long been considered a takeover target as its stock slumped on weak natural gas prices.

David Meats, an equity analyst with Morningstar, said that Talisman's mix of operating assets, low-risk development stage projects and exploration plays would be attractive to a buyer like Repsol.

The Spanish company is cash-rich since settling a two-year dispute with Argentina earlier this year over the seizure of the company's business there.

"It's a mix of assets that are cash flow positive now, funding the development of low-risk and quite stable resource plays in North America," said Meats. "The cherry on top is the really the exploration prospects like Kurdistan (in Iraq), which have huge potential for upside."

Talisman may be more attractive for its parts than the company as a whole.

It operates in some of the world's most desirable petroleum areas, including the Eagleford shales in Texas, the Marcellus shale region in the U.S. Northeast, Western Canada's burgeoning Duvernay and Montney shales. It also has oil assets in Vietnam and Indonesia.   Continued...

A man walks past a petrol station owned by Spanish oil major Repsol in central Madrid November 26, 2013.  REUTERS/Sergio Perez